Whats new for the 2023 tax year?

by | Mar 6, 2024

Tax time

WHAT’S NEW FOR INDIVIDUALS

The following changes apply for the first time to 2023 T1 personal tax returns for individuals, which are due on April 30, 2024.

  1. Advance Canada Workers Benefit payments: Taxpayers no longer must apply for advance payments of the Canada Workers Benefit (CWB) when they file their tax returns. These payments are now issued automatically to those who were entitled to receive the benefit in the previous tax year. Form RC201, Canada Workers Benefit Advance Payments Application, is discontinued.
  2. Deduction for tradesperson’s tools expenses: Starting in 2023, employees can deduct up to the $1,000 for tradesperson’s tools expenses (increased from $500).
  3. First Home Savings Account (FHSA): The FHSA is a new registered account to help individuals save for their first home. Starting in 2023, contributions to an FHSA are deductible and the income earned in an FHSA is not taxable. Qualifying withdrawals from an FHSA to purchase a first home are also not taxable. See our previous tax blog for more information.
  4. Multigenerational Home Renovation Tax Credit: This new refundable tax credit is available for up to $7,500 (15 per cent of $50,000) of the costs of a qualifying renovation to an eligible dwelling that is completed to allow a qualifying individual to live with a qualifying relation. You can claim the credit (see T1, Schedule 12) for qualifying expenditures made or incurred after December 31, 2022, for services performed or goods acquired after that date.
  5. Working from home deduction: The temporary flat rate method for claiming employees’ home office expenses only applied for 2020 to 2022 and is no longer available.

WHAT’S NEW FOR BUSINESSES

  1. Immediate expensing of capital: This incentive was applicable to eligible property available for use before January 1, 2024. In the case of individuals and Canadian partnerships (all the members of which are individuals), this incentive remains in place for eligible property available for use before January 1, 2025.
  2. Accelerated investment incentive: Eligible property for this incentive must be acquired after November 20, 2018, and be available for use before January 1, 2028. For eligible property that becomes available for use after 2023, a phase-out period applies reducing the overall capital cost allowance over 2024 to 2027.
  3. Phase-out of zero-emission vehicles and automotive equipment: On March 2, 2020, the federal government proposed a temporarily enhanced Capital Cost Allowance (CCA) rate of 100 per cent for eligible zero-emission automotive equipment and vehicles. A phase-out period reducing the overall CCA rate from one hundred per cent is in effect for eligible vehicles or equipment that become available for use after 2023.
  4. Substantive Canadian Controlled Private Corporations (CCPC):  Substantive CCPCs are private corporations’ resident in Canada that are ultimately controlled, in law or in fact, by Canadian-resident individuals. These private companies are set up to avoid CCPC status and its refundable tax regime. On April 7, 2022, the government announced plans to prevent this type of tax planning. The final legislation is included in Bill C-59 and will apply to tax years starting on or after April 7, 2022.
  5. Excessive Interest and Financing Expense Limitation (EIFEL): The EIFEL rules are intended to restrict Canadian taxpayers’ interest deductions based on a percentage of their “tax‑EBITDA.” The rules are incredibly detailed and complicated, with exceptions for specifically defined entities. The proposed legislation is included in Bill C-59 and would apply for tax years starting on or after October 1, 2023 (transitional rules also apply).
  6. Clean economy Investment Tax Credits (ITC): The government continues to prioritize implementing new tax credits encouraging clean economy investments. In the 2023 Fall Economic Statement, the government announced effective dates for eligibility for the various ITCs as follows:(
  7. Electronic payments: Newly enacted legislation requires taxpayers to remit tax payments over $10,000 electronically or pay a penalty of $100 per payment. The CRA stated to CPA Canada that it expects to allow a grace period before enforcing the rules. During this time, the CRA will continue educating taxpayers on electronic payment options and encouraging them to pay electronically.
  8. Underused Housing Tax (UHT): In the 2023 Fall Economic Statement, changes were proposed to the UHT rules in line with CPA Canada’s recommendation to define “excluded owners” for UHT purposes to include “specified Canadian corporations,” partners of “specified Canadian partnerships,” and trustees of “specified Canadian trusts.” These excluded owners would no longer have UHT reporting obligations for 2023 and future years.
  9. Prescribed rate: The CRA’s prescribed interest rates for overdue remittances, overpaid remittances and taxable benefits are increased for the first quarter of 2024 by one per cent over Q4 2023. Prescribed rates announced for 2023 and 2024 to date are as follows:
  10. Short-term rentals: In its 2023 Fall Economic Statement, the federal government proposed to deny deductions for short-term rentals for taxpayers where there is non-compliance with provincial or municipal laws or regulations related to short-term rentals, starting on January 1, 2024.